Amerigroup: Excluding the People Medicaid Paid It to Cover

Amerigroup agreed to pay $225 million in the Illinois Medicaid adverse selection case over avoiding pregnant women and other costly patients, following a jury finding of fraud. The managed care fraud case reached inside the business: marketing instructions, enrollment targets tied to compensation, and promises to the state that contradicted how the plan recruited members. For someone who knows how a health plan chooses whom to approach and whom to discourage, that is where this case becomes recognizable.

Amerigroup Illinois operated the Medicaid plan as a wholly owned subsidiary of Amerigroup Corporation. A former associate vice president of government relations brought the qui tam case, and Illinois and the United States joined it. The Justice Department announced the settlement on August 14, 2008.

How Enrollment Became a Payment Issue

Medicaid capitation pays a plan a fixed amount per enrolled member per month to provide covered health care. The mix of people enrolled therefore matters to the plan’s costs. A plan that keeps expensive patients out can keep its medical spending down while collecting rates built for a population that includes them.

The National Health Law Program’s 2015 A Guide to Oversight, Transparency, and Accountability in Medicaid Managed Care explains the incentive plainly:

In Amerigroup’s case, the promise to accept people without discriminating over their health was part of the bargain. The court described a restriction against health-based discrimination in the Illinois contract and a written assurance to the state. The government’s payment rates depended on that promise.

The company had put its commitment in writing, and that assurance became evidence against its enrollment operation. Its corrective-action letter, reproduced in the court’s opinion, said:

Who the Enrollment Team Was Told to Avoid

The whistleblower alleged that marketing representatives were trained and supervised to walk away from pregnant women. The complaint also described a screening question that would be familiar to anyone working in plan enrollment: did the prospective member need a specialist?

The complaint alleged that avoiding pregnant women let Amerigroup collect the higher capitation rate without the accompanying prenatal and neonatal costs. It also alleged that an employee arranged to retroactively disenroll premature babies expected to need extended neonatal intensive care, moving them back to fee-for-service Medicaid.

These were allegations about decisions inside the plan, before and after enrollment. We see the same financial objective in both: keep the payment advantage while pushing expensive care back onto the public program.

Why Enrollment Forms Counted as False Claims

The court treated Amerigroup’s enrollment forms as payment claims because the company submitted them to obtain capitation payments. A form could accurately identify an enrolled member while carrying a false assurance that the plan was honoring the contract that made those payments possible.

The court’s account describes two ways Amerigroup cheated the program. Amerigroup promised not to discriminate when it obtained the state contract, despite having no intention of keeping that promise. It then submitted enrollment applications seeking payments based on that same promise. The jury agreed on both.

The payment trail continued beyond the plan. Illinois used enrollment information in its CMS-37 estimates of expected spending and CMS-64 reports of actual spending to obtain federal reimbursement. Illinois had combined the information into expenditure totals.

The jury found 18,130 false enrollment claims. The expert counted forms containing at least one female between the ages of 17 and 44 in Amerigroup’s electronic eligibility database. The plan’s own data helped put a count on the claims.

For an insider, the connection is concrete: what the company promised, how it selected members, and what it submitted to get paid. Those were the links supporting this False Claims Act case.

The Jury’s Damages, the Judgment and the Settlement

The jury found $48 million in government damages in 2006. The court tripled that amount to $144 million and imposed $190,365,000 in civil penalties, producing a $334,365,000 judgment. Amerigroup later agreed to settle that judgment for $225 million. We see a striking discount even after a jury found fraud.

The settlement also required a corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General. Amerigroup had to adopt marketing and enrollment protections against discrimination, obtain independent annual reviews of those practices, and have its board certify the compliance program’s effectiveness each year. Those obligations applied across its managed care plans during the agreement’s term.

What Evidence Is Needed to Prove Fraud?

In this enrollment case, the evidence connected company promises to marketing instructions, management reports, compensation objectives and payment records. The court’s discussion of the parent company’s involvement shows why the story extended well beyond a conversation at an enrollment desk.

The Target Was in the Management Reports

Amerigroup Corporation and its Illinois subsidiary jointly developed quarterly quality and cost improvement initiatives. One aimed to reduce third-trimester enrollments. Illinois executives regularly reported progress to the parent, whose employees helped develop policy guidelines about not approaching people late in pregnancy.

The parent also issued Major Job Objectives tied to bonuses and compensation that concerned reducing third-trimester enrollments. Its chief marketing officer trained representatives in Chicago, and corporate staff helped shape the Illinois plan’s marketing materials.

We see a particularly ugly incentive there: managers’ compensation tied to keeping pregnant women out of a publicly funded health plan. A recruitment decision at the desk had a counterpart in the management objectives above it.

What the State Saw Was Different

The court also described a corrective-action plan sent to Illinois on the parent company’s stationery, promising not to discriminate against people with health issues. A corporate training guide sent to the state omitted the Illinois plan’s practice of avoiding pregnant and less healthy people.

The court found sufficient evidence that the parent actively participated in the false claims and in obtaining the contract through false promises. Marketing, management and regulatory communications all helped connect the parent to the Illinois operation.

The People Kept Out Left No Enrollment Record

The damages evidence addressed a problem created by the conduct itself: Amerigroup had kept no records of the people it avoided enrolling. The court explained that walking away before signing someone up left no paper trail from which to calculate that person’s costs.

The damages expert therefore compared Amerigroup’s medical loss ratio with those of a selected group of other plans. The jury also heard estimates based on birthrates, third-trimester births and a changed rate structure. Those comparisons helped measure the financial effect of the enrollment practices already shown by the operating evidence.

For a marketing, finance or compliance employee, this is why knowledge of the instructions and the reporting chain matters. An enrollment file can show who got in. Management reports and staff instructions can explain who was kept out, and why. We work with insiders to connect those different views of the business.

Continuity of Care Was the Company’s Explanation

Amerigroup argued that state guidance about continuity of care helped explain its conduct. The jury rejected that defense. The court also pointed to evidence that the company’s objective in avoiding pregnant and less healthy people was to save money.

Continuity of care was the company’s framing. The court’s account of compensation targets and exclusion policies puts that explanation against the business’s own decisions.

WellCare Shows the Enrollment Incentive Again

WellCare’s civil settlement also covered allegations of avoiding costly beneficiaries, alongside inflated medical spending and false patient and treatment data. The enrollment allegation belongs beside Amerigroup because both concerned who a plan wanted to cover. WellCare’s broader reporting allegations also show another place the financial story can surface: what the plan tells the state it spent and provided.

Can You Get Paid for Reporting Medicaid Fraud?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Amerigroup’s agreement set the whistleblower’s share at 25% of each government’s settlement receipts, for a stated combined award of $56.25 million.

You Know How the Enrollment Decisions Were Made

If the promise to accept eligible members clashes with the instructions your team receives, speak to our whistleblower experts about the members your plan was told to turn away. We bring in Medicaid managed care whistleblower lawyers and stay beside you, building your strongest case around your knowledge of the enrollment operation.